April 9, 2018 / 2:29 PM / a year ago

CEE MARKETS-Hungarian assets gain after Orban's election victory

    * PM Orban's election victory removes policy risks
    * Budapest stocks rise, OTP bucks trend after Raiffeisen
    * Hungary's strong economy overshadows political risks

 (Recasts with new analyst comments, background)
    By Sandor Peto
    BUDAPEST, April 9 (Reuters) - Hungarian stocks, bonds and
currency all gained on Monday after Prime Minister Viktor Orban
won a third term in Sunday's election, eliminating the risk of
unpredictable policy changes
    Budapest's main stock index rose 0.8 percent by 1325
GMT., A group of stocks, including holding companies Konzum
 and Opus, in which Orban ally Lorinc
Meszaros holds significant stakes, surged by 15 percent.
    OTP, the region's biggest independent bank, bucked
the trend, shedding more than 2 percent. Profit-taking hit other
bank stocks in the region as well, after Vienna-based regional
bank Raiffeisen plunged 13 percent plunge, Equilor
brokerage analyst Gabor Bukta said.
    But most Budapest shares rose, the forint gained 
0.1 percent to 311.9 against the euro, and the yield on
Hungary's 10-year government bonds was fixed lower by 10 basis
points at 2.46 percent.
    "The forint has strengthened a tad due to the elimination of
any tail risk of a hung parliament that could have led to
political, economic and monetary uncertainty," Nordea analyst
Morten Lund said in a note.
    Investors are now focusing on stability rather than the
political risk, after Orban's Fidesz party won a two-thirds
parliamentary majority.
    However, investors will watch to see whether Orban uses his
super-majority for policies that weaken the rule of law, some
analysts said.
    "It will be important to see if the prime minister and
others refer to such plans," said Gergely Urmossy, analyst of
Erste in Budapest.
    If that happens, low interest rates and a narrowing current
account surplus could increase the forint's volatility later
this year, he said.  
    Even without such measures, Hungary's relations with
Brussels and some European Union capitals might remain strained
as Orban leads resistance in Central Europe to the EU's quotas
to distribute migrants.
    The economy, however, is on the right track, with growth
around 4 percent, inflation well within the central bank's
target range and the budget deficit below the EU's threshold of
3 percent of economic output, analysts said.
    Urmossy said the Fidesz government was likely to keep budget
discipline as a priority, and may deliver a minor budget
adjustment later this year to contain the deficit. 
            CEE       SNAPSHOT   AT                         
            MARKETS             1525 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3650   25.3810    +0.06%    +0.70%
 crown      >                                       
 Hungary    <EURHUF=  311.9000  312.2500    +0.11%    -0.32%
 forint     >                                       
 Polish     <EURPLN=    4.1950    4.1962    +0.03%    -0.44%
 zloty      >                                       
 Romanian   <EURRON=    4.6629    4.6625    -0.01%    +0.36%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4255    -0.06%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  118.0700  118.1500    +0.07%    +0.36%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1128.29  1128.820    -0.05%    +4.65%
 Budapest             38260.29  37962.26    +0.79%    -2.84%
 Warsaw                2259.91   2258.80    +0.05%    -8.18%
 Ljubljana  <.SBITOP    828.03    823.66    +0.53%    +2.68%
 Zagreb                1804.07   1801.44    +0.15%    -2.11%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.7750   -0.0910   +135bps    -10bps
   5-year   <CZ5YT=R    1.2290   -0.0020   +132bps     -1bps
   10-year  <CZ10YT=    1.8070   -0.0330   +130bps     -4bps
   2-year   <PL2YT=R    1.4970    0.0130   +207bps     +1bps
   5-year   <PL5YT=R    2.2690   -0.0220   +236bps     -3bps
   10-year  <PL10YT=    3.0520   -0.0360   +255bps     -4bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                0.95      1.07      1.21      0.90
 Hungary                  0.07      0.10      0.18      0.03
 Poland                   1.74      1.75      1.77      1.70
 Note: FRA  are for ask prices                              
0 : 0
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